John MacDonald: The KiwiSaver divide that needs sorting

Canterbury Mornings with John MacDonald

I think it would be very easy to push-back on Retirement Commissioner Jane Wrightson’s call for changes to the KiwiSaver scheme to make it easier for self-employed people to save for their retirement.

But I’m not going to.

She wants to see changes because people who work for themselves are contributing nowhere near as much as employees —partly because they don’t get the benefit of an employer making contributions— and she says that could mean they end up living in poverty when they retire.

A tax expert agrees, saying a retirement savings scheme must work for all New Zealanders, regardless of how they earn their income.

According to a new survey, between April last year and March this year, only 44% of self-employed New Zealanders actively contributed to KiwiSaver compared to 78% of employees.

And of those self-employed people who did contribute, 41% of them didn’t get the government contribution because of irregular income or low earnings.

I say it would be easy to push back on what the Retirement Commissioner is calling for, because people who work for themselves are sometimes seen as having it made.

That’s, generally, the view of people who have never owned a business or have never been a sole trader. I've been a sole trader before and it's not easy. And I think we should be doing more to help these people get ready for retirement.

The question we need to ask ourselves is whether someone who goes out on their own in business —knowing full well that it’s a risky thing to do— should have some sort of backstop in the background for their retirement, or more government support for their retirement.

If you were to look at it in a very black and white fashion, you could say they shouldn't be supported. You could say to a business owner or a sole trader that, if they want the freedom and benefits of working for themselves, then it’s on them to save for their retirement.

But I don't see it that way.

Because even though there can be big opportunities and positives working for yourself, quite a lot of people still get burnt financially. And, as the Retirement Commissioner says, what happens to these people?

People who have next to nothing saved because they’ve just been focused on keeping their business afloat.

So wouldn’t it be better to help them out sooner rather than later?

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